Negative Amortization
The system does not allow you to use a periodic payment amount that is less than the periodic interest amount. If it did, the customer's payoff balance would increase over time (this is referred to as "negative amortization"). There are two methods you can use to specify a payment amount in the system. Depending on which method you use, the system informs you of negative amortization differently:
• If you enter a payment amount that is too small on the Start confirmation page or in the
Renegotiate Future Payments grid on
Loan maintenance, you get an error message when you click the
Calculate button. You must fix the payment amount before you can start the loan or save your changes.
• If you manually override the
Payment Amount on
Loan maintenance, you can save a payment amount that is too small to cover the interest charges. However, the system notifies you that it is not able to calculate the
Forecasted Schedule because of negative amortization. Additionally, bill segments for the loan SA are produced in error until the payment amount is adjusted appropriately.
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